Keeping your tax records

The Australian tax system relies on taxpayers self-assessing. This means you are responsible for working out how much you can declare and claim on your tax return. You also need to be able to show how you arrived at these figures – in some cases you may be required to provide written evidence.

In order to prepare an accurate tax return and support the claims you make, you need to keep careful records. The records you need to keep depend on your personal circumstances. If you are not sure, it is better to keep too many records than not enough.

This guide will provide general advice to help you identify what records you need to keep.

The importance of keeping records

Keeping good records helps you and your tax adviser:

to provide written evidence of your income and expenses

to help you or your tax agent prepare your tax return

to ensure you are able to claim all your entitlements

in case we ask you to prove the information you provided in your tax return

reduce the risk of tax audits and adjustments

improve communication with us

resolve issues relating to disputed assessments or adjustments

avoid exposure to penalties.

Other reasons for keeping good records are to:

make best use of your tax adviser – rather than paying them to sort through a shoebox of paperwork, give your tax adviser well-prepared records so they can ensure you get what you are entitled to

How long to keep your records

Generally, you must keep your written evidence for five years from the date you lodge your tax return or if you:

have claimed a deduction for decline in value (formerly known as depreciation) – five years from the date of your last claim for decline in value

acquire or dispose of an asset – five years after it is certain that no capital gains tax (CGT) event can happen, so you know you don't need the records to work out a capital gain or loss

are in dispute with us – the later of five years from the date you lodge your tax return or when the dispute is finalised.

Shorter retention from 2004–05 on

We have made a determination SDR 2006/1 that some records for 2004–05 and later income years held by individuals with simple tax affairs need only be retained for two years. The records that are covered by this determination are a:

family agreement that is relevant to 2004–05 or later

copy of a payment summary given to an individual in the income year commencing 1 July 2004 or later

taxpayer declaration that is made on or after 1 April 2004 for returns and documents lodged with us by a tax agent on a taxpayer's behalf, authorising the agent to lodge and declaring that the information supplied is correct (for example, the taxpayer declaration on a tax agent lodged tax return).

Simple tax affairs

You are classed as having simple tax affairs in an income year if you are an individual taxpayer and:

your income consists only of

salary or wages (other than from associates)

interest paid by a financial institution or government body

dividends from an Australian company listed on the Australian Stock Exchange (ASX).

you claim deductions only for

the cost of managing your tax affairs

bank fees and charges, including taxes and duties

deductible gifts of money and donations of money.

you are not

a foreign resident for the year of income

entitled to a foreign tax credit

required to adjust your taxable income because of payments to or from your associates

in receipt of a capital gain or loss that must be taken into account in your tax return

in receipt of foreign employment income, or income from service on an approved overseas project that is exempt from tax in Australia.

This advice tells you what main types of records you should keep in each of these categories. You may also need to keep records in some other categories, or for other members of your family – for example, if you receive the family tax benefit.

You may decide not to keep particular records – for example, because you expect to claim for only a small amount of business travel. If it turns out that you travel more than you expected during the year, you may be limited to a smaller claim than if you had kept more records.

If you’re not sure whether to keep a record, you should keep it – you can decide whether you need it at tax return time.

If you incur expenses for private purposes, you must have records that show how you worked out the amount of any private use.

If you obtain receipts or invoices, they could show such things as the:

name of the supplier

Australian business number (ABN) of the supplier

amount of the expense or purchase

nature of the goods or services purchased or expense incurred

date the expense was incurred

date of the document.

Lost or destroyed records

There may be times when your records are accidentally lost or destroyed – for example, if your home is burgled or burnt.

In these instances, we can allow you to claim a deduction for certain expenses if either of the following apply:

you have a complete copy of a lost or destroyed document

we are satisfied that you took reasonable precautions to prevent the loss or destruction and, if the document was written evidence, it is not reasonably possible to obtain a substitute document.

See also:

TR 97/24Income tax: relief from the effects of failing to substantiate

Electronic records

Documents that you are required to keep can be in written or electronic form. If you make paper or electronic copies they must be a true and clear reproduction of the original.

We recommend that if you store your records electronically you make a backup copy to ensure the evidence is easily accessible if the original becomes inaccessible or unreadable – for example, where a hard drive is corrupted.

Both methods require you to know or estimate your business kilometres. The records you need to keep will depend on your estimated business kilometres travelled. However, your claim at the end of the income year will depend on your actual business kilometres. If you cannot estimate your business kilometres, you should keep documentation as required by the logbook method. This will ensure that you can claim under the method which gives you the greater deduction.

Cents per kilometre method

You need records showing how you calculated business kilometres travelled and the amount of the claim – for example, diary entries and documents you can use to show the engine capacity of your car.

Logbook method

For each year you need:

odometer readings for the start and end of the period being claimed

business usage percentage based on the logbook

receipts or other documents showing fuel and oil expenses, or a reasonable estimate based on odometer readings

Your logbook is valid for five years. If this is the first year you are using this method (or the five years has expired) you will need to keep a logbook for this year. The logbook must cover at least 12 continuous weeks and show:

when the logbook period begins and ends

the car’s odometer readings at the start and end of the logbook period

the total number of kilometres travelled in the logbook period

the number of kilometres travelled for work activities based on journeys recorded for the period in the logbook. You need to record the start and finishing times and the odometer readings at the start and end of the journey, kilometres travelled, and the reason for the journey

the business-use percentage for the logbook period.

The following table sets out some of the rules about keeping logbooks in different circumstances:

Circumstance

Rule

First year of using logbook

You must keep a logbook during this income year.

Using the car for less than 12 weeks before the end of the income year

You are able to continue to keep the logbook in the following income year so that your logbook covers the required 12 weeks.

Keeping logbooks for two or more cars

The logbook for each car must cover the same period.

You also need to monitor the pattern of your car usage during the year and adjust the business-use percentage accordingly. For example, your business use is likely to vary during a holiday period.

The records you need to keep for travel depend on your length of stay and whether you have received a travel allowance. Where you receive a travel allowance and you restrict your claim to the reasonable amount we advise each year, you do not need to keep written evidence of your expenses.

Local government councillors

A local governing body (LGB) may resolve that its members be subject to the pay as you go withholding system.

If you are a local government councillor and your LGB has passed such a resolution, you will be treated as an employee for tax purposes and will be required to keep written evidence for your work-related expenses and car expenses.

Written evidence may include receipts or other documents to show the expenses you have incurred in carrying out your duties as a local government councillor.

When you have acquired or disposed of an asset

If you acquire or dispose of an asset which might be subject to capital gains tax, you should keep:

documents showing the dates you acquired an asset and the date the capital gains tax (CGT) event occurred. A CGT event must occur for a capital gain or loss to arise. There is a wide range of CGT events, but the most common occurs when you sell or give away an asset. Common examples of documentation are

contracts for the purchase or sale of an asset (such as real estate or shares)

documents showing the amount and date of any expenditure for that asset. In some cases, the expenditure is needed to calculate any gain or loss – for example, council rate notices for a vacant block of land

records of any unapplied net capital losses from previous years. You may be able to offset these against capital gains in this year.

a signed letter from the eligible organisation confirming the amount of your donation or contribution (and the amount of the minor benefit, where you have made a deduction for a contribution where there is a minor benefit – for example, a charity dinner).

Our commitment to you

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations.

If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take.

Some of the information on this website applies to a specific financial year. This is clearly marked. Make sure you have the information for the right year before making decisions based on that information.

If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice.